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10 December 2016

Woolworths vs ACCC

So it looks like the ACCC lost it's "unconscionable conduct" case against Woolworths. The judge didn't think there were any laws which covered the behaviour, so even if the behaviour of the Woolworths seemed harsh it wasn't actually illegal. However, I think the ACCC fought the wrong case. It was a classic case of extortion, no different in any fundamental way to organised crime groups extorting local businesses.

It seems that Woolworths wrote to it's 821 "Tier B" suppliers, demanding one-off payments to "support" Woolworths. The payments were not part of any contract or agreement. They were motivated by missed profit targets, that Woolworths had set for themselves. They demanded around $60 million and apparently received around $18 million.

In Australia, extortion is defined in the 1899 Criminal Code as:

    (1) A person (the demander) who, without reasonable cause, makes a demand— 
        (a) with intent to— 
            (i) gain a benefit for any person (whether or not the demander); or 
            (ii) cause a detriment to any person other than the demander; and 
        (b) with a threat to cause a detriment to any person other than the demander; 
    commits a crime. 

If following through on the threat "would be likely to cause, substantial economic loss in an industrial or commercial activity conducted by a person or entity other than the offender", then the maximum sentence is life imprisonment.

The nature of the detriment doesn't need to be defined. The threat doesn't need to be made privately.

Woolworths said this practice is quite normal in the retail industry. The ACCC said if it's not illegal then it should be. "Competition experts" said to win the case, the ACCC would have had to prove that the behaviour went beyond industry norms. However, Coles has been to court for the same things and the two companies are over 70% of the industry. Which would suggest their behaviour largely dictates industry norms. Imagine if the ethics of all behaviour was determined purely by narrow peer group norms.

So in summary, they should have ran an extortion case.


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